RBI Holds Rates Steady Amid Global Uncertainty; Experts Call For Structural Reforms To Sustain Growth
CareEdge Ratings Chief Economist stated amid persistent global uncertainties and inflationary pressures the outlook suggests a cautious approach from the central bank, writes Saurabh Shukla.
Published : April 8, 2026 at 5:11 PM IST
New Delhi: The Reserve Bank of India's (RBI) decision to hold rates today was widely expected, but beneath that calm surface, experts warn that monetary policy is running out of runway. With Financial Year 27 growth forecast trimmed to 6.9 per cent, and crude prices still volatile, the central bank isn't in a hurry to reverse the rate cycle. Especially when growth risks are lingering.
Yet the real challenge experts argue is no longer just about rates. After 125 basis points of easing, further cuts will deliver only modest gains. Foreign investors have grown selective, and the country now needs more than strong macros to secure sustained flows. Markets may be pricing in aggressive hikes over the next year, but with a fragile West Asia ceasefire in place that could be overdone.
Rajani Sinha, Chief Economist, CareEdge Ratings, said it was expected that the RBI’s Monetary Policy Committee (MPC) would maintain a status quo on policy interest rate and its stance, given the fluid global environment.
Given the expectations of high energy prices and supply side bottlenecks, the gross domestic product (GDP) growth forecast for FY27 has been revised downwards to 6.9 per cent, on assumption of crude oil averaging US$ 85/bbl.
"The RBI has highlighted that there is a downward risk to growth. Our growth projection for FY27 is 6.7 per cent, based on assumption of crude oil averaging US$ 90/bbl. While a ceasefire to West Asia war has been announced for two weeks, a lot will depend on how the conflict situation settles down and the time taken for the restoration of supply bottlenecks. RBI projects inflation for FY27 at 4.6 per cent, in line with our expectations. It is important to note that core inflation excluding precious metals remains benign," she added.
Amid persistent global uncertainties and inflationary pressures, the outlook suggests a cautious approach from the central bank, said Rajani Sinha.
"Going forward, we expect the Central Bank to maintain the status quo on policy interest rate. While there are upside risks to inflation, the impact of higher global crude oil prices on CPI inflation will somewhat be mitigated by the sharing of the burden between government, OMCs and households. Given the lingering growth concerns, RBI will not be in a hurry to reverse the rate cycle," Sinha said.
She also added that on the currency front, the outlook remains cautiously optimistic with easing geopolitical tensions expected to lend some support to the Rupee.
"With respect to the Rupee, some easing of geopolitical uncertainties following the recent ceasefire should provide some support to the currency. However, the RBI is likely to remain vigilant and continue its efforts to curb excessive volatility in the foreign exchange market. We expect USD/INR to average 92-93 levels in FY27, on the assumption of global crude oil prices averaging US$ 90/bbl," she added.
Abhishek Bisen, Head-Fixed Income of Kotak Mahindra Asset Management Company (AMC), believes that RBI Policy has been in line with the expectations, and the MPC unanimously decided to hold policy repo rate at 5.25 per cent and maintained stance as neutral.
"And the West Asia war poses downside risk to the GDP forecast as well as upside risks to inflation," Bisen said.
He believes that the RBI will continue to remain proactive and pre-emptive to maintain ample liquidity. "The market seems to be pricing in significant rate hikes over the next 12-15 months. However, given the recent developments related to two week ceasefire in the West Asia war, we believe rate hikes priced in by market are much higher than what is likely to be delivered. 10 Year G-Sec yields have stayed flat post RBI policy though it has fallen by 12 basis points (BPS) since yesterday and is trading around 6.92 per cent levels," added Bisen.
Sachin Sawrikar, Managing Partner, Artha Bharat Investment Managers, believes that the RBI’s decision to hold rates is pragmatic, but it also highlights a broader constraint, monetary policy is nearing the limits of what it can achieve on its own.
"With around 125 basis points of easing already in the system and liquidity conditions supportive, the incremental impact of further cuts is likely to be modest," Sawrikar said.
He said that the ceasefire in West Asia is a clear near-term positive, easing pressure on crude and inflation. "But the bigger issue now is capital. In a volatile global environment with tighter liquidity, foreign investors are far more selective. India's macro fundamentals remain strong, but they are no longer sufficient by themselves to guarantee sustained flows," added Sawrikar.
Highlighting the need for a broader policy push beyond interest rates, Sachin Sawrikar said, "The next phase of policy therefore needs to move beyond rates. Improving foreign portfolio investment (FPI) participation through tax clarity, regulatory simplicity, deeper market access and faster execution will matter as much as headline growth. Monetary policy can stabilise the cycle, but it cannot by itself drive capital allocation."
He further said that if crude remains contained, the RBI will retain flexibility. "But without reducing friction for global investors, India risks under‑capturing the capital flows its growth story should command," he added.
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